Charter International's board is on the verge of recommending a £1.5bn
takeover bid from Colfax, the US-listed manufacturing group.

Barring any last-minute problems, the two companies hope to announce early next week that Charter's board has recommended an offer from Colfax that values the London-listed engineering business at 900p a share, according to sources.

A potential recommended deal comes after a period in which Colfax has been carrying out due diligence on Charter.

It is thought an initial indicative offer from Colfax, which specialises in pumping and fluid-handling systems, was pitched at 870p a share.

Charter shares were in demand on Friday, rising 20 to 804p, amid speculation a formal offer from Colfax may be announced on Monday morning.

Analysts at UBS added weight to the gossip after the broker upgraded the stock to "neutral" from "sell" following a conversation with Colfax's management team.

Stephen Swanton, an analyst at UBS, said: "Colfax's interest in Charter has been brewing for some time thanks to a supplier relationship between a subsidiary of theirs and Howden [Charter's division that designs, manufactures, installs and maintains air and gas handling equipment for use in the power, oil and gas, petrochemical and other industries]."

Colfax's largest shareholders are the billionaire Rales brothers, who are estimated to be worth more than $5bn (£3.1bn).

The Maryland-based company is vying with UK-listed turnaround business Melrose to buy Charter.

At the beginning of the month, Melrose raised its indicative cash-and-shares offer to 850p a share and is now looking over Charter's books.

Analysts at UBS argued that the value of Melrose's offer has fallen in recent days to 820p a share following a fall in its shares and the structure of its offer.

Mr Swanton concluded: "Our impression is that Colfax view a cash bid as being superior to Melrose's offer."